Hitachi Construction Machinery (Australia) Pty Ltd: Strategic Analysis

Background:

Hitachi Construction Machinery (Australia) Pty Ltd is a subsidiary of the Japan based Hitachi Construction Machinery and it deals in the sales and distribution of forestry machinery, mining equipment, quarry, construction and recycling machinery. The construction company deals in the sale of both new and used machinery. The company has presence all over Australia and employs over 1000 employees in about 26 locations in the country. The company is also attached to John Deere and Bell Construction. The company’s mission “is to be the leading supplier of excavators, mining shovels, rigid dump trucks and front end loaders with market share positions in key mining, construction and plant hire markets” (Company Website 2012).

With the above mission, the company has four main objectives that help in fulfilment of the mission. The objectives include protecting and enhancing its position as a leading competitor in the global industry and provide reliable solutions that are customer driven. Another objective also targets improvement of employee welfare while the last one targets building shareholder value.

Issues:

The company’s approach to decision making involves the use of strategic management plans that enable the company top follow on the achievement of the set objectives and company’s mission.

For instance, the company’s latest mid-term management plan covers the period between 2011 and 2013. The plan is divided into several parts, each of which is targeted to address part of business operation. The first part of the plan addresses the business and market environment. This part deals with five main areas: Hard product strategy, mining strategy, solution (sales & service) strategy, regional strategy and enhancement of management base. The other part of the plan targets performance of the company. The plan seeks to address various business risks of diverse nature. For instance, the performance plan targets to ensure that there continuous flow of information within the various stakeholders thereby mitigating the risk of information lapse and also help in ensuring that there a close and unfailing partnership between the firm and other stakeholders throughout the world.

The hard-product strategy is an instrumental instrument in the risk management plan of the firm since it has an established global R & D, which works for development of products that are market-oriented and suited for each market on the global scale. This strategy mitigates the risk of need for sudden change in product as well as the risk of losing sales to competitors. Standardisation, unification and integration of quality are some of the major strategies that are known to reduce the risk in doing business. Hitachi Construction Machinery has standardised its products and integrated the quality of these products and these reduce the risk of increased costs of production in the long run.

The company has a directional decision making procedure where the lower cadre employees receive directives from the top management. In part, while this might be a good strategy to ensure consistency and stability in decision making, it is a major source of risk for the organisation. Recent works (such as Hafeez 2009) have demonstrated that there is an overriding school of thought, which views strategic decision making process in general as leadership. This is the entrepreneurial school of thought. However, Hafeez (2009) points out that all the managers in an organisation contribute in a certain way in the achievement of the strategic decisions of the company and round-table decision making procedure makes more sense in our modern highly volatile business environment. Rather, it is the conglomeration of the minds of the different individuals in the organisation that expands the level of thinking and makes achievement of strategic objectives possible.

Recommendations:

Having looked at the company’s approach, it is important to reiterate that the risks a company is likely to encounter sprout from the dealings within the internal and external environments and with all its stakeholders. For this reason, it is important that every stakeholder is considered in the objectives. Therefore, Hitachi Construction Machinery needs to clearly incorporate all stakeholders in its mission and objectives. Moreover, it is a fact that there is need for harmonization between the mission of the governments (as stakeholders in the organisation) and the internal practices within the institution such that even though there is clear evidence of complexity in arguing for shareholder value maximisation especially if we consider organisations set for profit purposes such as Hitachi Construction Pty Ltd every stakeholder, including the government shall be well represented. This is in light of the modern organisation environment where it is evident that the stakeholders in any organisations are more aware and hence demand for their share thereby easily creating conflict of interest.

Considering that the firm has a profit maximisation objective well laid out, this basically addresses the shareholder value maximisation. While that objective would entirely set the business to take a profit-maximizing perspective, it must be harmonised with the society’s needs and objectives since it is the society that provides the charter for the business the to exist and operate. Therefore, the goals set by the organisation must reflect the values it stands for, which in turn must embody the desires of all the stakeholders. If the goals set do not reflect the values in such a way that all stakeholders’ wishes are catered for, it is likely that agency problem will soon arise.

Another suggestion for the company is to gear its targets to tapping governments as major customers. The governments world over are major customers for construction machinery companies and this reduces the risk of payment defaults. The company might also find it more beneficial to used matrix of round-table decision making process as it allows different noble ideas to be incorporated into the achievement of the set mission of the firm (Hitt et al 2002).

Lastly, the firm should use experience and know-how in sectors entailing reconstruction to make use of its resources and capabilities. Diversification is another area that firms use to manage business risks very well. Therefore, it is recommended that the firm should continue to search for new opportunities in areas where skills and know-how developed in the company can be leveraged. With increasing global competition from small business and projects, the firm can follow these by sub-units that aim to compete in low price market segments. This can be bolstered by creating a specialized unit which handles small scale customers.

Reference

Hafeez,K. (2009). Entrepreneurship & Intrapreneurship. Available: http://www.york.ac.uk/enterprise/cetle/resources/curriculum/entrepreneurship-module.pdf.. Last accessed 4th Oct 2012.

Hitt, M A. Raphael Amit, Charles E. Lucrier, & Robert D. Nixon (Jun 24, 2002). Creating Value: Winners in the New Business Environment. London: John Wiley & Sons. p114-158.

Company Website (2012).Who We are. Available: HYPERLINK “http://www.hitachicareers.com.au/about-us/who-we-are/”http://www.hitachicareers.com.au/about-us/who-we-are/ Last accessed 4th Oct 2012.